IDEAS home Printed from https://ideas.repec.org/a/sae/amerec/v65y2020i1p97-122.html
   My bibliography  Save this article

Assessing the Role of Governance in West African Fiscal Performance

Author

Listed:
  • Fisayo Fagbemi

Abstract

The article analyzes the short-run and long-run dynamic relationship between the quality of institutions and fiscal performance in 12 West African countries over the period of 1984 to 2016 using Pooled Mean Group and Mean Group estimator. The results show that, in the long run as well as in the short run, improved governance appears to lead to decreasing deficits. In comparison with other measures, in the long run, democratic accountability dimension seems to have the most significant effect on West African fiscal performance. However, the empirical evidence further reveals that, in the short run, the institutional dimensions are found to be insignificant in explaining West African fiscal performance. Hence, given that increased public debt could harm the quality of sustainable fiscal measures, the study suggests that creating incentives for the building of sound institutions and securing enabling governance would enhance fiscal prudence and sustainability in West Africa. JEL Classifications : G, H

Suggested Citation

  • Fisayo Fagbemi, 2020. "Assessing the Role of Governance in West African Fiscal Performance," The American Economist, Sage Publications, vol. 65(1), pages 97-122, March.
    • Handle: RePEc:sae:amerec:v:65:y:2020:i:1:p:97-122
    DOI: 10.1177/0569434519857593
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0569434519857593
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0569434519857593?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Benjamin E. Diokno, 2007. "Economic and Fiscal Policy Determinants of Public Deficits: The Philippine Case," UP School of Economics Discussion Papers 200702, University of the Philippines School of Economics.
    2. Alberto Alesina & Filipe R. Campante & Guido Tabellini, 2008. "Why is Fiscal Policy Often Procyclical?," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1006-1036, September.
    3. Mark Hallerberg & Jürgen von Hagen, 1999. "Electoral Institutions, Cabinet Negotiations, and Budget Deficits in the European Union," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 209-232, National Bureau of Economic Research, Inc.
    4. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, vol. 17(3), pages 235-266, September.
    5. Torsten Persson & Lars E. O. Svensson, 1989. "Why a Stubborn Conservative would Run a Deficit: Policy with Time-Inconsistent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 325-345.
    6. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
    7. Stefania Fabrizio & Ashoka Mody, 2006. "Can budget institutions counteract political indiscipline? [‘Constitutions, politics, and economics’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 21(48), pages 690-739.
    8. Giovanni Coletta & Carmen Graziano & Giancarlo Infantino, 2015. "Do fiscal councils impact fiscal performance?," Working Papers 1, Department of the Treasury, Ministry of the Economy and of Finance.
    9. Gösta Ljungman, 2009. "Top-Down Budgeting—An Instrument to Strengthen Budget Management," IMF Working Papers 2009/243, International Monetary Fund.
    10. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    11. Andres Velasco, 1999. "A Model of Endogenous Fiscal Deficits and Delayed Fiscal Reforms," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 37-58, National Bureau of Economic Research, Inc.
    12. Mr. Oral Williams & Mr. Olumuyiwa S Adedeji, 2007. "Fiscal Reaction Functions in the CFA Zone: An Analytical Perspective," IMF Working Papers 2007/232, International Monetary Fund.
    13. Talvi, Ernesto & Vegh, Carlos A., 2005. "Tax base variability and procyclical fiscal policy in developing countries," Journal of Development Economics, Elsevier, vol. 78(1), pages 156-190, October.
    14. Devarajan, Shantayanan & Easterly, William R & Pack, Howard, 2003. "Low Investment Is Not the Constraint on African Development," Economic Development and Cultural Change, University of Chicago Press, vol. 51(3), pages 547-571, April.
    15. Mr. Richard I Allen, 2009. "The Challenge of Reforming Budgetary Institutions in Developing Countries," IMF Working Papers 2009/096, International Monetary Fund.
    16. Campos, Ed & Pradhan, Sanjay, 1996. "Budgetary institutions and expenditure outcomes : binding governments to fiscal performance," Policy Research Working Paper Series 1646, The World Bank.
    17. Alberto Alesina, 1987. "A Positive Theory of Fiscal Deficits and Government Debt in a Democracy," UCLA Economics Working Papers 435, UCLA Department of Economics.
    18. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    19. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, November.
    20. Eschenbach, Felix & Schuknecht, Ludger, 2002. "Asset prices and fiscal balances," Working Paper Series 141, European Central Bank.
    21. International Monetary Fund, 2005. "Fiscal Transparency and Economic Outcomes," IMF Working Papers 2005/225, International Monetary Fund.
    22. Alesina, Alberto & Hausmann, Ricardo & Hommes, Rudolf & Stein, Ernesto, 1999. "Budget institutions and fiscal performance in Latin America," Journal of Development Economics, Elsevier, vol. 59(2), pages 253-273, August.
    23. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    24. Fosu, Augustin Kwasi & Getachew, Yoseph Yilma & Ziesemer, Thomas H.W., 2016. "Optimal Public Investment, Growth, And Consumption: Evidence From African Countries," Macroeconomic Dynamics, Cambridge University Press, vol. 20(8), pages 1957-1986, December.
    25. repec:aer:wpaper:23 is not listed on IDEAS
    26. Mr. Ashoka Mody & Ms. Stefania Fabrizio, 2006. "Can Budget Institutions Counteract Political Indiscipline?," IMF Working Papers 2006/123, International Monetary Fund.
    27. Mariano Tommasi & Mark P. Jones & Pablo Sanguinetti, 1997. "Politics, Institutions, and Fiscal Performance in the Argentine Provinces," Working Papers 16, Universidad de San Andres, Departamento de Economia, revised Apr 2000.
    28. Hallerberg, Mark & Strauch, Rolf & von Hagen, Jurgen, 2007. "The design of fiscal rules and forms of governance in European Union countries," European Journal of Political Economy, Elsevier, vol. 23(2), pages 338-359, June.
    29. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
    30. Enrique Alberola & Manuel Montero, 2006. "Debt Sustainability and Procyclical Fiscal Policies in Latin America," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2006), pages 157-193, August.
    31. Augustin Kwasi Fosu & Yoseph Getachew & Thomas H.W. Ziesemer, 2014. "Optimal Public Investment, Growth, and Consumption: Fresh Evidence from African Countries," Working Papers 201464, University of Pretoria, Department of Economics.
    32. Hallerberg,Mark & Rainer Strauch,Rolf & von Hagen,Jürgen, 2010. "Fiscal Governance in Europe," Cambridge Books, Cambridge University Press, number 9780521138260, November.
    33. Poterba, James M. & von Hagen, Jurgen (ed.), 1999. "Fiscal Institutions and Fiscal Performance," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226676234, October.
    34. James M. Poterba & Jürgen von Hagen, 1999. "Fiscal Institutions and Fiscal Performance," NBER Books, National Bureau of Economic Research, Inc, number pote99-1, June.
    35. repec:bla:obuest:v:61:y:1999:i:0:p:631-52 is not listed on IDEAS
    36. Ezequiel Cabezon & Mr. Tej Prakash, 2008. "Public Financial Management and Fiscal Outcomes in Sub-Saharan African Heavily-Indebted Poor Countries," IMF Working Papers 2008/217, International Monetary Fund.
    37. Perotti, Roberto & Kontopoulos, Yianos, 2002. "Fragmented fiscal policy," Journal of Public Economics, Elsevier, vol. 86(2), pages 191-222, November.
    38. Alessandro Lizzeri, 1999. "Budget Deficits and Redistributive Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(4), pages 909-928.
    39. Alt, James E. & Lassen, David Dreyer, 2006. "Fiscal transparency, political parties, and debt in OECD countries," European Economic Review, Elsevier, vol. 50(6), pages 1403-1439, August.
    40. Mr. Xavier Debrun, 2011. "Democratic Accountability, Deficit Bias, and Independent Fiscal Agencies," IMF Working Papers 2011/173, International Monetary Fund.
    41. International Monetary Fund, 1996. "Budget Processes and Commitment to Fiscal Discipline," IMF Working Papers 1996/078, International Monetary Fund.
    42. Hovhannes Toroyan & Mr. George C Anayiotos, 2009. "Institutional Factors and Financial Sector Development: Evidence from Sub-Saharan Africa," IMF Working Papers 2009/258, International Monetary Fund.
    43. Carlos Mulas-Granados & Jorge Onrubia & Javier Salinas-Jiménez, 2009. "Do Budget Institutions Matter?: Fiscal Consolidation in the New EU Member States," Eastern European Economics, Taylor & Francis Journals, vol. 47(1), pages 60-91, January.
    44. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    45. Sophia Gollwitzer & Eteri Kvintradze & Mr. Tej Prakash & Luis-Felipe Zanna & Ms. Era Dabla-Norris & Mr. Richard I Allen & Irene Yackovlev & Victor Duarte Lledo, 2010. "Budget Institutions and Fiscal Performance in Low-Income Countries," IMF Working Papers 2010/080, International Monetary Fund.
    46. Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
    47. Avinash K. Dixit, 1998. "The Making of Economic Policy: A Transaction Cost Politics Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540983, December.
    48. Wehner, Joachim, 2006. "Legislative institutions and fiscal policy," LSE Research Online Documents on Economics 25509, London School of Economics and Political Science, LSE Library.
    49. Inman, Robert P & Fitts, Michael A, 1990. "Political Institutions and Fiscal Policy: Evidence from the U.S. Historical Record," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(0), pages 79-132.
    50. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    51. Jones, Mark P. & Sanguinetti, Pablo & Tommasi, Mariano, 2000. "Politics, institutions, and fiscal performance in a federal system: an analysis of the Argentine provinces," Journal of Development Economics, Elsevier, vol. 61(2), pages 305-333, April.
    52. Bunch, Beverly S, 1991. "The Effect of Constitutional Debt Limits on Stage Governments' Use of Public Authorities," Public Choice, Springer, vol. 68(1-3), pages 57-69, January.
    53. Edin, Per-Anders & Ohlsson, Henry, 1991. "Political determinants of budget deficits: Coalition effects versus minority effects," European Economic Review, Elsevier, vol. 35(8), pages 1597-1603, December.
    54. Rose, Shanna, 2010. "Institutions and Fiscal Sustainability," National Tax Journal, National Tax Association;National Tax Journal, vol. 63(4), pages 807-837, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adekunle, Wasiu & Bekoe, William & Badmus, Sheriff & Anagun, Michael & Alimi, Wasiu, 2021. "Nexus Between Fiscal Discipline And The Budget Process In Africa: Evidence From Nigeria," MPRA Paper 110061, University Library of Munich, Germany.
    2. Fisayo Fagbemi & Opeoluwa A. Adeosun, 2020. "Public Debt-Investment Nexus: the Significance of Investment-Generation Policy in West Africa," Research Africa Network Working Papers 20/083, Research Africa Network (RAN).
    3. Arjun & Bibhuti Ranjan Mishra, 2024. "External Debt and Economic Growth: Does the Role of Governance Matter in Emerging Countries?," SAGE Open, , vol. 14(2), pages 21582440241, May.
    4. Fisayo Fagbemi & Opeoluwa A. Adeosun, 2020. "Public Debt-Investment Nexus: the Significance of Investment-Generation Policy in West Africa," Working Papers of the African Governance and Development Institute. 20/083, African Governance and Development Institute..
    5. Fisayo Fagbemi & Opeoluwa A. Adeosun, 2020. "Public Debt-Investment Nexus: the Significance of Investment-Generation Policy in West Africa," Working Papers 20/083, European Xtramile Centre of African Studies (EXCAS).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sophia Gollwitzer & Eteri Kvintradze & Mr. Tej Prakash & Luis-Felipe Zanna & Ms. Era Dabla-Norris & Mr. Richard I Allen & Irene Yackovlev & Victor Duarte Lledo, 2010. "Budget Institutions and Fiscal Performance in Low-Income Countries," IMF Working Papers 2010/080, International Monetary Fund.
    2. Alesina, A. & Passalacqua, A., 2016. "The Political Economy of Government Debt," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2599-2651, Elsevier.
    3. Marcela Eslava, 2011. "The Political Economy Of Fiscal Deficits: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 645-673, September.
    4. Sophia Gollwitzer, 2010. "Budget Institutions and Fiscal Performance in Africa," Discussion Papers 10/02, University of Nottingham, CREDIT.
    5. Dilla, Diana, 2017. "Staatsverschuldung und Verschuldungsmentalität [Public Debt and Debt Mentality]," MPRA Paper 79432, University Library of Munich, Germany.
    6. Ringa Raudla, 2010. "Governing budgetary commons: what can we learn from Elinor Ostrom?," European Journal of Law and Economics, Springer, vol. 30(3), pages 201-221, December.
    7. John Ashworth & Benny Geys & Bruno Heyndels, 2005. "Government Weakness and Local Public Debt Development in Flemish Municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(4), pages 395-422, August.
    8. Jens Dietrichson & Lina Ellegård, 2015. "Institutions improving fiscal performance: evidence from Swedish municipalities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(5), pages 861-886, October.
    9. Ziogas, Thanasis & Panagiotidis, Theodore, 2021. "Revisiting the political economy of fiscal adjustments," Journal of International Money and Finance, Elsevier, vol. 111(C).
    10. Borge, Lars-Erik, 2005. "Strong politicians, small deficits: evidence from Norwegian local governments," European Journal of Political Economy, Elsevier, vol. 21(2), pages 325-344, June.
    11. Jan Zápal, 2007. "Cyclical Bias in Government Spending: Evidence from New EU Member Countries," Working Papers IES 2007/15, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised May 2007.
    12. Vlaicu, Razvan & Verhoeven, Marijn & Grigoli, Francesco & Mills, Zachary, 2014. "Multiyear budgets and fiscal performance: Panel data evidence," Journal of Public Economics, Elsevier, vol. 111(C), pages 79-95.
    13. Heiner Felix Mikosch & Silke Übelmesser, 2007. "Staatsverschuldungsunterschiede im internationalen Vergleich und Schlussfolgerungen für Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 8(4), pages 309-334, November.
    14. Woo, Jaejoon, 2003. "Economic, political, and institutional determinants of public deficits," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 387-426, March.
    15. Asatryan, Zareh & Castellón, César & Stratmann, Thomas, 2018. "Balanced budget rules and fiscal outcomes: Evidence from historical constitutions," Journal of Public Economics, Elsevier, vol. 167(C), pages 105-119.
    16. Jeffrey Frankel, 2013. "A Solution to Fiscal Procyclicality: The Structural Budget Institutions Pioneered by Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Luis Felipe Céspedes & Jordi Galí (ed.),Fiscal Policy and Macroeconomic Performance, edition 1, volume 17, chapter 9, pages 323-391, Central Bank of Chile.
    17. Hallerberg, Mark & Strauch, Rolf & von Hagen, Jurgen, 2007. "The design of fiscal rules and forms of governance in European Union countries," European Journal of Political Economy, Elsevier, vol. 23(2), pages 338-359, June.
    18. Blume, Lorenz & Voigt, Stefan, 2013. "The economic effects of constitutional budget institutions," European Journal of Political Economy, Elsevier, vol. 29(C), pages 236-251.
    19. Grigoli, Francesco & Mills, Zachary & Verhoeven, Marijn & Vlaicu, Razvan, 2012. "MTEFs and fiscal performance: panel data evidence," Policy Research Working Paper Series 6186, The World Bank.
    20. Lars P. Feld, 2010. "Sinnhaftigkeit und Effektivität der deutschen Schuldenbremse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 226-245, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:amerec:v:65:y:2020:i:1:p:97-122. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://journals.sagepub.com/home/aex .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.